Asian buyers target Melbourne

Asian buyers are dominating the market for Melbourne development sites, filling a void left by local players unable to stack up their projects in the face of restrictive lending practices.

The traditional buyers from Malaysia and Singapore are now competing with a flood of private money from China seeking a safe haven in Australian property.

“With the global economy experiencing some uncertainty, Australia, and more particularly Melbourne, is the destination of choice for Asian developers seeking to secure development land for high-density apartment projects," said Savills divisional director, CBD sales and investments, Nick Peden. The agency has brokered more than $100 million in sales to Asian developers in the past 18 months amidst “unprecedented demand" from the buyers.

“In the past fortnight Savills sold a 3200 square metre site with potential for more than 500 apartments at 224-250 La Trobe Street for $29.2 million, and an 8000 square metre office building on a 900 square metre site at 150 Queen Street for $25.5 million, the latter earmarked for residential conversion by purchaser Chip Eng Seng of Singapore," Mr Peden said.

Other Asian buyers include SP Setia and Mammoth Empire Holdings, both from Malaysia, along with several private developers from mainland China.

Savills’ Clinton Baxter said off-shore developers had long recognised that Melbourne’s sound fundamentals made it very attractive for investment.

Mark Wizel, of CB Richard Ellis City Sales, said the recent drop in the Australian dollar had sparked renewed interest from overseas developers for Melbourne sites.

“We are still finding that the Malaysian and Singaporean developers are showing a tendency to purchase only sites in the Melbourne CBD or on St Kilda Road, the latest example being Setia Australia’s $25 million plus purchase of 557 St Kilda Road, while the mainland Chinese tend to focus on blue-chip inner suburbs such as South Yarra," he said.

Related Quotes

Company Profile

Mr Wizel said Beijing heavyweight LYZ Property Group is about to begin sales and marketing on the former Deague family’s site at 4-10 Daly Street, South Yarra.

“There is little doubt that the most dominant buyers for larger $15 million plus sites in Melbourne over the past two years have been the Asian developers," he said. The lack of activity from local developers was due to difficulties local groups were finding when it came to financing larger projects in the current climate, Mr Wizel said.

“The overseas groups are using both a blend of local and offshore funding and it won’t surprise me if the offshore developers move even more towards pure offshore funding over the next 12 months."